Recently I put a number of my individual holdings into pies, one of which is this consumer staples pie.
My investment goals are long term holds with dividends - not trading.
I have a great deal in US based stocks in this pie - as you can imagine I am being rinsed by FX at times - but my theory was that in general the US markets see greater capital returns and dividend increases than we do in the UK (regardless of whether this is correct that was my thinking at the time) and I use more products from these companies than their potential UK counterparts.
The last couple of days I have been thinking about investing in Diageo and/or Reckitt Benckiser as UK based companies that are large brands which would mean no negative FX impact for my investments or dividend taxes (using ISA).
So far I have done some quick research on Diageo to get me started. The trend for them seems to be that share price, net income, cash etc. all increase over time. PE ratio of 19. Dividend yield of 2.39% with a cover of 1.57. However, on Yahoo Finance their payout ratio is listed as 116% (same on other sites too) - how can their payout ratio be 116% but cover 1.57? A payout ratio of 116% is worrying, but a cover of 1.57 not so much… I don’t understand this as isn’t one just the inverse of the other?
Does anyone have any other insights on Diageo? Or Reckitt? Or any of my pie holdings for that matter.
Would you ditch any of my US holdings and insert either of the above in their place? Have you done this already?
Diageo always seems to get good recommendations. Here’s another one:
“Diageo has a bright long-term future, which puts it on this list of reliable alcohol stocks. One big reason is its entrenched position in under-developed nations around the world. The emerging markets are more important for Diageo, which is a headwind in the short-term, but is likely to be a long-term tailwind.”
With Diageo it is because their income this year halved (thereabouts) so yes the cover wouldn’t be feasible if stayed like this but their income is predicted to bounce back almost fully, 2019 it was 52.71% then as you say now 116% but predicted to be back to about 60% or so next year. I feel they are safe as such strong brands and realistically people are not going to stop drinking.
One to look at I feel is Unilever its UK and strong steady dividend stock, great brands, in every (or pretty much?) country in the world.
Thanks for replies so far. Like the look of Diageo now that’s been cleared up. Will have a closer look at Unilever.
Just trying to decipher the RB annual report now - Yahoo Finance seems to have some weird figures which paint their 2019 results as a loss but the RB annual report shows only growth.
